Papers by Marios Zachariadis

How different are Monetary Unions to national economies according to prices?
International Journal of Finance & Economics
Not that different. Based on a unique dataset of semi-annual microeconomic price levels of goods ... more Not that different. Based on a unique dataset of semi-annual microeconomic price levels of goods and services across and within countries for 1990:1-2018:2, we show that time-series volatility and cross-sectional dispersion of law-of-one-price deviations is similar for pairs of cities within the same country and within the European Monetary Union. Our empirical analysis reveals that inflation and nominal exchange rate volatility/dispersion across locations have a positive impact on the volatility/dispersion across locations of law-of-one-price deviations across the globe. Furthermore, dispersion of law-of-one-price deviations across goods falls when the relative inflation rate between these locations rises, suggesting that the degree of price adjustment in individual product markets within a country has an international component shaped by international trade and arbitrage considerations. According to this measure of price integration, economies within the monetary union are half-way to the level of integration characterizing national economies. Moreover, monetary union membership reduces the volatility of law-of-one-price deviations, taking member countries more than half-way towards the volatility levels characterizing national economies.
Replication data for: Understanding European Real Exchange Rates
We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and ... more We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and services between all European Union (EU) countries for the years 1975, 1980, 1985, and 1990. We find that for each of these years, after we control for differences in income and value-added tax (VAT) rates, there are roughly as many overpriced goods as there are underpriced goods between any two EU countries. We also find that good-by-good measures of cross-sectional price dispersion are negatively related to the tradeability of the good, and positively related to the share of non-traded inputs required to produce the good. We argue that these observations are consistent with a model in which retail goods are produced by combining a traded input with a non-traded input.
We study deviations from the Law-of-One-Price using microeconomic data on the retail prices of ap... more We study deviations from the Law-of-One-Price using microeconomic data on the retail prices of approximately 220 individual goods and services across 122 cities located in 79 countries over the period from 1990 to 2000. This paper builds on our earlier work (Crucini, Telmer and Zachariadis (2001)) which focused on how price dispersion within a …xed geography (the European Union) varied by type of good or service. For example, in moving from the least traded good with the largest share of non-traded inputs into retail production (a haircut) to the most traded goods with the lowest share of non-traded inputs into retail production (a desk-top PC), the standard deviation of price across locations dropped from about 32% to 16%. Moreover, the median (and majority) of goods and services fell between these two extremes.
This paper considers the relation between immigration and prices in a number of countries across ... more This paper considers the relation between immigration and prices in a number of countries across the world over the period from 1990 to 2006. Immigration is shown to have a negative impact on international relative prices. A ten percent increase in the share of immigrant workers in total employment decreases the prices of final products by as much as three percent. Our results suggest that the tendency of this factor of production to relocate to relatively expen-sive high-wage countries exerts downward pressure on prices of tradeables and non-tradeables there relative to other locations. The effect of immigration on prices is more evident for goods consumed by immigrants as compared to goods produced by immigrants.

Cross-sectional variation in European real exchange rates
Using a panel of over 5,000 local currency prices of retail goods and services sold in the capita... more Using a panel of over 5,000 local currency prices of retail goods and services sold in the capital cities of Europe in 1975, 1980, 1985 and 1990, we characterize the behavior of average relative prices — ‘real exchange rates ’ — as well as dispersion around these averages. We …nd that the averages are surprisingly close to what purchasing power parity would suggest. In other words averages of ratios of foreign to domestic prices (across goods for a particular pair of countries) provide relatively accurate predictions of most nominal cross-rates. Variation around the averages, however, is large but is found to be related to economically meaningful characteristics of goods such as measures of international tradeability, the importance of non-traded inputs into production and the competitive structure of the markets in which the goods are sold. Using data on product brands, we …nd that product heterogeneity is at least as important as geography in explaining relative price dispersion. ...
Models of R&D-induced growth : an empirical investigation
Firms’ expectations and monetary policy shocks in the euro area
Journal of International Money and Finance, 2021

Empirical Economics, 2018
The paper investigates the process of European integration using Law of One Price (LOP) deviation... more The paper investigates the process of European integration using Law of One Price (LOP) deviations for a large number of individual goods and services during the recent Crisis. We find that the degree of integration of Eurozone economies continued to increase during this period. Importantly, we trace the location of individual goods in the distribution of LOP deviations so as to understand how price advantage or disadvantage has evolved or persisted during the Crisis. We find that rigidities rendering prices in some markets higher persisted during the same period. Thus, while well-deserved policy emphasis has been placed by the Eurozone on correcting fiscal imbalances and on monetary policy to address the resulting deflationary bias, our work suggests that little has been done in practice to break structural rigidities in goods and services markets during the period under study. Finally, comparing the distributions of LOP deviations for each of the Eurozone economies, we show that to the extent that there was adjustment for some of these economies this did not occur via the same channels for all Eurozone countries, suggesting different non-tradeables and tradeables adjustment mechanisms being in place in different countries.

Journal of Money, Credit and Banking, 2016
We put together a unique panel of thousands of good‐level prices before and after the euro to com... more We put together a unique panel of thousands of good‐level prices before and after the euro to compare the determinants and understand the evolution of goods price dispersion across Europe over time. We find that tradeability and nontraded inputs play a significantly smaller role for cross‐country price dispersion after the adoption of the euro, and for Eurozone economies as compared to European Union ones. We then compare the distributions of law‐of‐one‐price (LOP) deviations over time to understand how the degree of integration across European economies changed after the euro. Our tests reveal that the distributions after the euro are typically significantly different from those before, consistent with a greater degree of integration. Utilizing our unique panel data set to trace the location of individual goods in the distribution of LOP deviations, we ask how the price advantage or disadvantage evident in these price distributions evolves over time, and whether goods characteristi...

SSRN Electronic Journal, 2018
By adjusting their lending, banks can smooth or amplify the macroeconomic impact of deposit fluct... more By adjusting their lending, banks can smooth or amplify the macroeconomic impact of deposit fluctuations. This may however lead to extended periods of disproportionately high lending relative to deposit intake, resulting in the accumulation of risk in the banking system. Using bank-level data for 8,477 banks in 129 countries for the 24-year period from 1992 to 2015, we examine how individual banks' market power and other characteristics may contribute to smoothing or amplification of shocks and to the accumulation of risk. We find that the higher their market power the lower is the growth rate of lending relative to deposits. As a result, in periods of falling deposits, higher market power for the average bank would be associated with a greater fall in lending resulting in amplification of adverse effects as deposits fall during relatively bad times. Strikingly, at very high levels of market power there is a threshold past which the effect of market power on the growth rate of lending relative to deposits turns positive so that "superpower"banks contribute to smoothing of adverse effects when deposits are falling. In periods of rising deposits, however, such banks lead to amplification and accumulation of risk in the economy.
The Scandinavian Journal of Economics, 2019
We estimate monetary policy surprises for European consumers over time, based on monetary policy ... more We estimate monetary policy surprises for European consumers over time, based on monetary policy changes that were unanticipated according to consumers’ stated beliefs. We find that such monetary policy surprises have the opposite impact on inflation expectations from the impact found when assuming that consumers are well informed. Relaxing the latter assumption by focusing on consumers’ stated beliefs, unanticipated increases in the interest rate raise inflation expectations before the 2008 financial crisis. This is consistent with imperfect information theoretical settings where interest rate hikes are interpreted as positive news about the state of the economy by consumers who know that policymakers have relatively more information.

Journal of Applied Econometrics, 2018
SummaryThis paper uncovers novel empirical patterns in the cross‐country price mechanism using a ... more SummaryThis paper uncovers novel empirical patterns in the cross‐country price mechanism using a nonlinear factor model and threshold regression analysis based on individual goods retail price data for a large panel of countries. To our knowledge, this is the first paper to find strong evidence for club convergence of retail prices. These clubs emerge due to the interaction of traded and nontraded factors. For example, countries physically closer to potential trade partners converge faster than countries in the high distance regime as long as they have low initial labor productivity or low initial income. Moreover, we find an asymmetry in the extent that arbitrage opportunities related to international trade are exploited, with low initial price regime countries exhibiting faster convergence from below than high initial price regime countries exhibit from above, consistent with less resistance to exporting than to importing due to political economy considerations. We interpret our f...
University of Cyprus Working Papers in Economics, Feb 1, 2008
This paper investigates the determinants of longevity at a macroeconomic level, emphasizing the i... more This paper investigates the determinants of longevity at a macroeconomic level, emphasizing the important role played by education. To analyze the determinants of longevity, we build a model where households intentionally invest in health and education, and where education exerts external effects on longevity. Performing an empirical analysis using data across 71 countries, we find that society's tertiary education attainment rate is important for longevity, in addition to any role that basic education plays for life expectancy at the individual level. This finding uncovers a key externality of education, consistent with the theoretical hypothesis advanced in our macroeconomic model.
We argue that education exerts positive external effects on health, beyond the standard internal ... more We argue that education exerts positive external effects on health, beyond the standard internal effects documented in the literature. We put forward a model that clarifies the links between education and longevity in the presence of such an externality. We then implement an innovative approach to control for endogeneity problems, and present evidence for the significant role played by higher education in explaining longevity across countries. Our findings provide empirical evidence in support of our hypothesis of educational externalities on health.

What Determines Technology Diffusion Across Frontiers? R&D Content, Human Capital and Institutions
Economics Bulletin
This paper examines the determinants of international technology diffusion across a sample of 127... more This paper examines the determinants of international technology diffusion across a sample of 127 countries for the period 1961-2011. We measure technology diffusion by the importation of two capital goods categories that embody different R&D content: computers and metalworking machinery. We find that economic institutions and political institutions have a large and significant effect on computer imports (that embody a higher R&D content) but not for less technologically-intensive types of capital goods such as metalworking machinery. The role of institutions is mirrored by that of human capital. Together, these results highlight the role of institutions and human capital in facilitating embodied technology diffusion through capital goods imports, more than mere capital accumulation.

SSRN Electronic Journal, 2004
In the absense of free trade, domestic productivity will be a major determinant of prices. I cons... more In the absense of free trade, domestic productivity will be a major determinant of prices. I consider an empirical framework where an industry's R&D determines its productivity. Using repeated cross-sections of absolute prices of individual goods across European countries, I find that products of an industry tend to be cheaper in countries with higher stocks of R&D in that industry. I proceed to consider a model with two sectors: a non-R&D-performing service sector and a manufacturing sector whose R&D expenditures lead to productivity gains. Here, higher productivity for the R&D-intensive sector is associated with lower prices of manufactures and a higher price ratio of services to manufactures for the country. Indeed, the data shows that high productivity countries have lower prices for manufactures and, implicitly, higher services to manufactures price ratios. This implies that the overall price level will be lower in the more productive country as long as the size of the productive sector is sufficiently large.

SSRN Electronic Journal, 2012
A number of recent papers point to the importance of distinguishing between the price reaction to... more A number of recent papers point to the importance of distinguishing between the price reaction to micro and macro shocks in order to reconcile the volatility of individual prices with the observed persistence of aggregate in ‡ation. We emphasize instead the importance of distinguishing between global and local shocks. We exploit a panel of 276 micro price levels collected on a semi-annual frequency from 1990 to 2010 across 88 cities in 59 countries around the world, that enables us to distinguish between di¤ erent types (local and global) of micro and macro shocks. The persistence associated with each of these components and its relation with volatility of the di¤erent components, provides a number of new facts. Prices respond more slowly to global shocks as compared to local ones -in particular, prices respond faster to local macro shocks than to global micro ones -implying that the relatively slow response of prices to macro shocks documented in recent studies comes from global rather than local sources. In addition, more volatility in local conditions leads to more persistent relative price distortions due to slower response of prices to global shocks, with this local -global link more than twice as large as the corresponding micro-macro link. Finally, global shocks account for half of the volatility in prices. Overall, our results imply that global shocks are important when analyzing price dynamics or assessing price-setting models.
Does medical technology originating in countries close to the technology frontier have a signific... more Does medical technology originating in countries close to the technology frontier have a significant impact on health outcomes in countries distant from this frontier? This paper considers a framework where lagging countries may benefit from medical technology (a result of research and development by countries close to the frontier) that is embodied in medical imports or diffuses in the form of ideas. Using a novel dataset from a cross-section of 73 technology-importing countries, we show that medical technology diffusion is an important contributor to improved health status, as measured by life expectancy and mortality rates.
American Economic Review, 2005
We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and ... more We study good-by-good deviations from the Law-of-One-Price (LOP) for over 1,800 retail goods and services between all European Union (EU) countries for the years 1975, 1980, 1985, and 1990. We find that for each of these years, after we control for differences in income and value-added tax (VAT) rates, there are roughly as many overpriced goods as there are underpriced goods between any two EU countries. We also find that good-by-good measures of cross-sectional price dispersion are negatively related to the tradeability of the good, and positively related to the share of non-traded inputs required to produce the good. We argue that these observations are consistent with a model in which retail goods are produced by combining a traded input with a non-traded input.
Review of Development Economics, 2005
This paper evaluates various channels through which foreign technology diffuses to the manufactur... more This paper evaluates various channels through which foreign technology diffuses to the manufacturing sector of selected developing economies. These economies carry out very little (if any) own R&D so they rely on foreign technology to a much larger extent than developed economies. We investigate the direct effect of foreign R&D, as well as technology embodied in imports of intermediate and capital goods and foreign direct investment, on the growth of manufacturing total factor productivity and value added in 32 developing economies during the 1965-1992 period. We find that foreign R&D typically has the biggest positive impact on domestic productivity and value added growth. Imports of technology goods and foreign direct investment also play a similar positive role but their effect is of smaller magnitude and is not always significant.
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Papers by Marios Zachariadis